From Apartments and Nuclear Power to AI Infrastructure... Construction Stocks Awaken as Orders Revive [Weekend Money]

Orders for Nuclear Power and AI Infrastructure Surge, Driven by Middle East Reconstruction
Simultaneous Rebound in Housing Starts, Pre-Sales, and Contracts

Units 1 to 4 of the Barakah Nuclear Power Plant in the United Arab Emirates (UAE) constructed by Hyundai Engineering & Construction

Orders—the main source of revenue for construction companies—are reviving both domestically and internationally. Analysts note that contracts for apartment redevelopment projects, nuclear power plants, Middle East reconstruction, liquefied natural gas (LNG), power grids, and artificial intelligence (AI) data centers are not only highly anticipated but are now materializing for the construction sector.

On June 20, Shin Young Securities provided this analysis for the construction industry. This year, the sector is showing a clear rebound in major leading indicators. As of the end of April, cumulative housing starts reached 72,000 units, up 22.0% year-on-year. The number of new private apartment pre-sales increased by 46.4% to 41,000 units. Approvals for multi-family housing pre-sales also rose by 71.4% to 72,000 units.

The data on new contracts is even more striking. As of April, cumulative private housing orders amounted to 33.6 trillion won, a 48.7% increase from the previous year. This is the highest level since 2021. The sector is now entering a phase where housing starts, pre-sales, approvals, and orders are all recovering simultaneously.

In the short term, the Middle East reconstruction is drawing the market’s attention. With the United States and Iran signing a memorandum of understanding to end the war, a formal end to hostilities is now a reality. Reconstruction and economic development programs, likely to be funded by private sector investment from various countries, are expected to take center stage. The size of the reconstruction fund is being discussed at around USD 300 billion (about 460 trillion won).

Even when looking solely at the restoration of energy facilities, the scale is significant. According to Rystad Energy, the cost to restore and rebuild energy-related infrastructure damaged by the regional conflict in the Middle East is estimated at up to USD 58 billion. Of this, the cost to restore oil and gas facilities could reach up to USD 50 billion, while industrial, power, and desalination facilities are expected to require between USD 3 billion and 8 billion. The largest share of these recovery costs will be in engineering and construction.

Sera Park, a researcher at Shin Young Securities, explained, "Major companies are reviewing reconstruction and recovery projects based on previous engineering, procurement, and construction (EPC) work performed by Korean firms, particularly in Qatar, Bahrain, and Kuwait," adding that, "With stability returning to the Middle East, delayed large-scale projects are also expected to normalize."

However, Middle East reconstruction is best viewed as a short-term momentum driver. What warrants greater attention are nuclear power plants and AI infrastructure. Of these, nuclear power projects may shift from 'expectation' to 'actual projects' as early as the second half of this year. With the implementation of the Special Act on Investment in the United States, concrete plans for U.S. nuclear power investment could materialize.

The nuclear power pipeline for domestic construction companies is also expanding. Team Korea secured a major reference through the main contract for the Dukovany Nuclear Power Plant Units 5 and 6 in the Czech Republic. The resumption of the Ninh Thuan nuclear power project in Vietnam is also cited as a potential follow-up opportunity. Hyundai Engineering & Construction is pursuing the Holtec Palisades SMR-300 first unit project. Samsung C&T is seeking opportunities in the Doicesti SMR project in Romania, while DL E&C is targeting standardized design for small modular reactors (SMRs) based on X-energy technology.

Whereas social overhead capital (SOC) in the past mostly centered on roads and railways, future SOC will increasingly focus on power grids, power generation, water, data centers, and energy infrastructure. Park described this as “production-oriented SOC.” In the AI era, it is just as important to build infrastructure for electricity delivery, cooling, water supply, and wastewater treatment as it is to construct factories and data centers.

Park emphasized, “Although the Middle East reconstruction issue is emerging as a short-term driver of stock price increases, it serves merely as a pretext for the sector’s re-evaluation. The real essence is the structural transformation in the ordering environment, which is being confirmed both at home and abroad.”

This content was produced with the assistance of AI translation services.